DUBLIN, Ohio, Oct. 29 /PRNewswire-FirstCall/ -- Cardinal Health, a global
provider of products and services that improve the safety and productivity of
health care, today reported an 11 percent increase in revenue to $24 billion,
driven by strong sales in the Healthcare Supply Chain Services segment and
continued growth within Clinical and Medical Products.
For the quarter ended Sept. 30, the Healthcare Supply Chain Services
segment achieved double-digit revenue growth, which helped partially offset
the expected year-over-year profit decline from previously disclosed contract
re-pricings and anti-diversion efforts for controlled substances.
First-quarter GAAP earnings per share (EPS) declined 16 percent from the
prior year period to $0.69. Special items primarily related to the
restructuring announced on July 8 and impairments resulted in a $0.05 dilutive
impact, bringing non-GAAP EPS from continuing operations(1) to $0.74.
In early October, Cardinal Health entered into an agreement with the U.S.
Drug Enforcement Administration (DEA) to resume shipments of controlled
substances from three of the company's distribution centers, which is
anticipated to contribute to growth in the second half of the fiscal year. The
company expects these facilities to fully resume shipment of controlled
substances by the end of November.
"The company performed as expected with double-digit revenue and profit
performance from Clinical and Medical Products, and I am encouraged by
continued signs of early progress in the pharmaceutical supply chain
business," said R. Kerry Clark, chairman and CEO of Cardinal Health. "We
remain focused on driving growth for both segments, while working diligently
toward completing the spin-off of our clinical and medical products businesses
by the middle of calendar 2009."
The company announced on Sept. 29 that its board of directors had approved
plans for a tax-free spin-off of most of its clinical and medical products
businesses as a separate, publicly traded company. Completion of the spin-off
is subject to final approval by the company's board of directors, confirmation
of the tax-free nature of the transaction and the effectiveness of a Form 10
registration statement to be filed with the U.S. Securities and Exchange
Commission.
Q1 FY09 SUMMARY
Q1 FY09 Q1 FY08 Y/Y
Revenue $24.3 billion $22 billion 11 %
GAAP Operating
Earnings $426 million $490 million (13)%
Non-GAAP Operating
Earnings(2) $482 million $512 million (6)%
GAAP Earnings from
Continuing Operations $250 million $303 million (18)%
Non-GAAP Earnings
from Continuing
Operations(3) $268 million $318 million (16)%
GAAP Diluted EPS from
Continuing Operations $0.69 $0.82 (16)%
Non-GAAP Diluted EPS from
Continuing Operations $0.74 $0.86 (14)%
FIRST-QUARTER SEGMENT RESULTS
Healthcare Supply Chain Services
Q1 FY09 Q1 FY08 Y/Y
Revenue $23.4 billion $21.1 billion 11 %
Segment Profit $292 million $347 million (16)%
Healthcare Supply Chain Services increased revenue by 11 percent to $23.4
billion, from sales to both pharmaceutical and medical supply chain customers.
Sales to bulk customers(4) increased 20 percent to $10.7 billion and sales to
non-bulk customers(5) increased 4 percent to $10.6 billion. Segment profit
declined 16 percent to $292 million, primarily driven by previously disclosed
pharmaceutical contract re-pricings, continued disruption from anti-diversion
efforts for pharmaceutical supply chain customers and lower branded price
inflation compared to the prior year period.
"In the pharmaceutical supply chain business, we made significant progress
towards our key priorities, including rebuilding sales momentum, particularly
in the direct store business, growth in our Source Generics program and a
resolution with the DEA related to the distribution of controlled drugs," said
George Barrett, Cardinal Health vice chairman and CEO of Healthcare Supply
Chain Services. "While the positive financial impact of this progress will
not be felt immediately, each represents an important milestone in turning the
business in a positive direction. Other highlights from the segment include
our lab and ambulatory businesses within the medical products supply chain.
They performed particularly well for the quarter, and we expect to continue
this momentum for the remainder of the fiscal year."
Clinical and Medical Products
Q1 FY09 Q1 FY08 Y/Y
Revenue $1.2 billion $1 billion 12 %
Segment Profit $167 million $145 million 15 %
Revenue for Clinical and Medical Products increased 12 percent to $1.2
billion, driven by continued strength in dispensing, the Enturia acquisition
and international sales. Segment profit increased 15 percent to $167 million,
driven by the increase in revenue and growth in infection prevention products,
including Enturia. Segment profit was partially dampened by a rise in raw
material costs.
"Our core infusion and dispensing systems performed well, and our
ChloraPrep(R) products from the Enturia acquisition outperformed for the
quarter," said David Schlotterbeck, Cardinal Health vice chairman and CEO of
Clinical and Medical Products. "As we continue to make progress with our
quality system enhancements, we have essentially completed remediation efforts
for the Alaris(R) SE pump recall and expect to complete the Alaris(R) System
Pump Module recall by the end of the calendar year. In addition, the VIASYS
acquisition remains on schedule to meet our synergy targets for fiscal 2010."
ADDITIONAL FIRST QUARTER AND RECENT HIGHLIGHTS:
-- Reached agreements with the DEA and seven U.S. Attorneys' Offices that
resulted in reinstated licenses to distribute controlled substances from the
company's Auburn, Wash., Lakeland, Fla. and Swedesboro, N.J. distribution
centers.
-- Completed the sale of the company's MedSystems and Tecomet businesses,
which were non-strategic assets from the VIASYS acquisition.
-- Hosted approximately 400 health care industry leaders at the inaugural
Chasing Zero Summit to encourage a zero-tolerance approach to health care
associated infections (HAIs).
-- Signed 50 new customers for MedMined(TM) services, the market leader in
electronic infection surveillance.
-- The Cardinal Health Foundation launched the second annual $1 million
Patient Safety Grant to help U.S. hospitals, health systems and community
health clinics improve patient safety and health care quality.
-- Launched myPharmacyTrainer, a proprietary online training site that
helps independent pharmacies coach their employees to deliver better patient
care, improve customer loyalty and increase sales.
OUTLOOK
Cardinal Health's guidance range for the full year remains unchanged at
$3.80 to $3.95 for non-GAAP diluted EPS from continuing operations. Clark
said, "It is clear that we are operating in an unprecedented economic
environment, yet Cardinal Health remains well positioned with a strong balance
sheet that enables ongoing access to capital. While we have not seen any
definitive customer credit issues that would change our full-year outlook at
this time, we are seeing hospitals delay some purchase decisions that will
have some impact to our Clinical and Medical Products segment for the December
quarter. We are monitoring this very closely and will continue to take steps
to mitigate as much impact as possible."
The company's guidance does not reflect any incremental costs it will
incur associated with the spin-off and separation of the two companies. The
company expects a significant portion of these costs will be classified as
special items in accordance with company practices.
CONFERENCE CALL
Cardinal Health will host a conference call and webcast today at 8:30 a.m.
EDT to discuss first quarter results. To access the call and corresponding
slide presentation, visit the Investor page at www.cardinalhealth.com or dial
617-213-4845, passcode 12574826. Presentation slides, an audio replay and a
transcript will be archived on the Web site after the conclusion of the
meeting. The audio replay will also be available until 11 p.m. EDT on Oct. 31
by dialing 617-801-6888, passcode 49513300.
UPCOMING EVENTS
The 2008 annual meeting of shareholders will be held Nov. 5 at 2 p.m. EST
at Cardinal Health headquarters, 7000 Cardinal Place, Dublin, Ohio.
Shareholders are cordially invited to attend in person, or they can access the
live webcast of the meeting and corresponding slide presentation from the
Investors page at www.cardinalhealth.com. A replay and transcript also will be
available on the Investors page until 11 p.m. EST on Nov. 19.
Cardinal Health Chief Financial Officer Jeff Henderson will address
investors at the Annual Credit Suisse Healthcare Conference in Phoenix on Nov.
12 at 4:30 p.m. EST. Henderson will discuss Cardinal Health's diverse products
and services, company performance and strategies for continued growth. To
access the live webcast of his remarks or a transcript, go to the Investors
page at www.cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $91
billion, global company serving the health care industry with products and
services that help hospitals, physician offices and pharmacies reduce costs,
improve safety, productivity and profitability, and deliver better care to
patients. With a focus on making supply chains more efficient, reducing
hospital-acquired infections and breaking the cycle of harmful medication
errors, Cardinal Health develops market-leading technologies, including
Alaris(R) IV pumps, Pyxis(R) automated dispensing systems, MedMined(TM)
electronic infection surveillance service, VIASYS(R) respiratory care products
and the CareFusion(TM) patient identification system. The company also
manufactures medical and surgical products and is one of the largest
distributors of pharmaceuticals and medical supplies worldwide. Ranked No. 19
on the Fortune 500, Cardinal Health employs more than 40,000 people on five
continents. More information about the company may be found at
www.cardinalhealth.com .
(1) Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings
from continuing operations divided by diluted weighted average shares
outstanding.
(2) Non-GAAP operating earnings: Operating earnings excluding special
items and impairments, (gain)/loss on sale of assets and other, net.
(3) Non-GAAP earnings from continuing operations: Earnings from
continuing operations excluding special items and impairments, (gain)/loss on
sale of assets and other, net, both net of tax.
(4) Bulk customers consist of Healthcare Supply Chain Services customers
to which the segment distributes pharmaceutical, radiopharmaceutical and
over-the-counter health care products to the customers' centralized warehouse
operations and mail order businesses.
(5) Non-bulk customers consist of all Healthcare Supply Chain Services
customers to which the segment distributes pharmaceutical, radiopharmaceutical
and over-the-counter health care products other than bulk customers.
A reconciliation of the differences between these non-GAAP financial
measures and their most directly comparable GAAP financial measures is
provided in the attached tables and at http://www.cardinalhealth.com.
Cardinal Health uses its Web site as a channel of distribution for
material company information. Important information, including news releases,
analyst presentations and financial information regarding Cardinal Health is
routinely posted and accessible on the Investors page at
www.cardinalhealth.com.
This news release contains forward-looking statements addressing
expectations, prospects, estimates and other matters that are dependent upon
future events or developments. These matters are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected, anticipated or implied. The most significant of these
uncertainties are described in Cardinal Health's Form 10-K, Form 10-Q and Form
8-K reports (including all amendments to those reports) and exhibits to those
reports, and include (but are not limited to) the following: uncertainties
regarding the planned spin-off of the clinical and medical products businesses
as a new stand-alone entity, including the timing and terms of any such
spin-off and whether such spin-off will be completed, and uncertainties
regarding the impact of the planned spin-off on Cardinal Health, the new
clinical and medical products company and the potential market for their
respective securities; competitive pressures in Cardinal Health's various
lines of business; the loss of one or more key customer or supplier
relationships or changes to the terms of those relationships; uncertainties
relating to timing of generic and branded pharmaceutical introductions and the
frequency or rate of branded pharmaceutical price appreciation or generic
pharmaceutical price deflation; changes in the distribution patterns or
reimbursement rates for health-care products and/or services; the results,
consequences, effects or timing of any inquiry or investigation by any
regulatory authority or any legal or administrative proceedings; future
actions of regulatory bodies or government authorities relating to Cardinal
Health's manufacturing or sale of products and other costs or claims that
could arise from its manufacturing, compounding or repackaging operations or
from its other services; the costs, difficulties and uncertainties related to
the integration of acquired businesses; uncertainties related to the recent
disruptions in the financial markets, including uncertainties related to the
availability and/or cost of credit and the impact of the financial market
disruptions on Cardinal Health's customers and vendors; and conditions in the
pharmaceutical market and general economic and market conditions. This news
release reflects management's views as of Oct. 29, 2008. Except to the extent
required by applicable law, Cardinal Health undertakes no obligation to update
or revise any forward-looking statement.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
First Quarter
(in millions, except per Common 2009 2008 % Change
Share amounts)
Revenue $24,347.2 $21,973.4 11 %
Cost of products sold 22,982.7 20,631.2 11 %
Gross margin 1,364.5 1,342.2 2 %
Selling, general and
administrative expenses 882.2 830.1 6 %
Impairments, (gain)/loss on sale
of assets and other, net 3.6 (0.2) N.M.
Special items:
Restructuring charges 49.7 14.8 N.M.
Acquisition integration
charges 2.4 5.4 N.M.
Litigation and other 0.3 2.3 N.M.
Operating earnings 426.3 489.8 (13)%
Interest expense and other 62.4 42.9 45 %
Earnings before income taxes and
discontinued operations 363.9 446.9 (19)%
Provision for income taxes 114.1 143.7 (21)%
Earnings from continuing
operations 249.8 303.2 (18)%
Loss from discontinued
operations (net of tax expense
of $0.6 and $2.0 for the
first quarter of fiscal
2009 and 2008, respectively) (0.7) (1.4) N.M.
Net earnings $249.1 $301.8 (17)%
Basic earnings per Common Share:
Continuing operations $0.70 $0.83 (16)%
Discontinued operations - - N.M.
Net basic earnings per
Common Share $0.70 $0.83 (16)%
Diluted earnings per Common Share:
Continuing operations $0.69 $0.82 (16)%
Discontinued operations - - N.M.
Net diluted earnings per
Common Share $0.69 $0.82 (16)%
Weighted average number of
Common Shares outstanding:
Basic 356.7 363.0
Diluted 361.1 370.2
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, June 30,
(in millions) 2008 2008
Assets
Cash and equivalents $672.2 $1,291.3
Trade receivables, net 5,862.3 5,006.9
Current portion of net investment in
sales-type leases 384.8 383.7
Inventories 7,692.1 6,768.8
Prepaid expenses and other 614.9 593.1
Assets held for sale - 140.4
Total current assets 15,226.3 14,184.2
Property and equipment, net 1,749.5 1,737.2
Net investment in sales-type leases,
less current portion 935.8 916.8
Goodwill and other intangibles, net 6,265.1 6,225.9
Other assets 468.4 384.1
Total assets $24,645.1 $23,448.2
Liabilities and Shareholders' Equity
Current portion of long-term
obligations and other short-term
borrowings $166.5 $159.0
Accounts payable 9,354.6 8,311.8
Other accrued liabilities 1,902.6 1,889.7
Liabilities from businesses held for
sale and discontinued operations 2.4 15.4
Total current liabilities 11,426.1 10,375.9
Long-term obligations, less current
portion and other short-term borrowings 3,597.0 3,687.4
Deferred income taxes and other
liabilities 1,703.9 1,637.4
Total shareholders' equity 7,918.1 7,747.5
Total liabilities and shareholders'
equity $24,645.1 $23,448.2
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
First Quarter
(in millions) 2009 2008
Cash Flows From Operating Activities:
Net earnings $249.1 $301.8
Loss from discontinued operations 0.7 1.4
Earnings from continuing
operations 249.8 303.2
Adjustments to reconcile earnings
from continuing operations
to net cash provided by / (used
in) operating activities:
Depreciation and amortization 101.0 94.9
Asset impairments and (gain)/loss
on sale of assets, net 3.6 (0.2)
Equity compensation 24.4 26.1
Provision for bad debts 12.6 5.0
Change in operating assets and
liabilities, net of
effects from acquisitions:
Increase in trade receivables (782.4) (191.9)
(Increase) / decrease in
inventories (873.6) 232.4
Increase in net investment in
sales-type leases (20.2) (24.1)
Increase / (decrease) in accounts
payable 982.6 (63.2)
Other accrued liabilities and
operating items, net (49.8) 57.0
Net cash provided by / (used in)
operating activities -
continuing operations (352.0) 439.2
Net cash used in operating
activities - discontinued operations (0.9) (30.4)
Net cash provided by / (used in)
operating activities (352.9) 408.8
Cash Flows From Investing Activities:
Acquisition of subsidiaries, net of
divestitures and cash acquired (6.1) (88.1)
Proceeds from sale of property and
equipment 1.0 2.5
Additions to property and equipment (89.6) (91.5)
Sale of investment
securities available for sale, net - 131.9
Net cash used in investing
activities - continuing operations (94.7) (45.2)
Net cash used in investing
activities - discontinued operations - -
Net cash used in investing
activities (94.7) (45.2)
Cash Flows From Financing Activities:
Net change in commercial paper and
short-term borrowings 1.2 232.0
Reduction of long-term obligations (152.6) (13.0)
Proceeds from long-term
obligations, net of issuance costs 8.5 0.1
Proceeds from issuance of Common
Shares 17.9 105.5
Tax benefits from exercises of
stock options 3.3 11.6
Dividends on Common Shares (49.8) (44.3)
Purchase of Common Shares in treasury - (674.7)
Net cash used in financing
activities - continuing operations (171.5) (382.8)
Net cash used in financing
activities - discontinued operations - -
Net cash used in financing activities (171.5) (382.8)
Net decrease in cash and equivalents (619.1) (19.2)
Cash and equivalents at beginning
of period 1,291.3 1,308.8
Cash and equivalents at end of
period $672.2 $1,289.6
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
Non-GAAP
First Quarter First Quarter
(in millions) 2009 2008 2009 2008
Revenue
Amount $24,347 $21,973
Growth Rate 11 % 5 %
Operating Earnings
Amount $426 $490 $482 $512
Growth Rate (13)% 9 % (6)% 8 %
Earnings from Continuing Operations
Amount $250 $303 $268 $318
Growth Rate (18)% 4 % (16)% 3 %
Refer to the GAAP / Non-GAAP Reconciliation for definitions and
calculations supporting the non-GAAP balances.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
First Quarter First Quarter
(in millions) 2009 2008 (in millions) 2009 2008
HEALTHCARE SUPPLY CHAIN SERVICES CLINICAL AND MEDICAL PRODUCTS
Revenue(1) Revenue(1)
Amount $23,418 $21,093 Amount $1,155 $1,032
Growth Rate 11 % 4 % Growth Rate 12 % 33 %
Mix 94 % 94 % Mix 5 % 5 %
Segment Profit(2) Segment Profit(2)
Amount $292 $347 Amount $167 $145
Growth Rate (16)% 4 % Growth Rate 15 % 70 %
Mix 60 % 68 % Mix 35 % 28 %
Segment Profit Segment Profit
Margin 1.25 % 1.65 % Margin 14.43 % 14.06 %
First Quarter
(in millions) 2009 2008
ALL OTHER
Revenue(1)
Amount $273 $294
Growth Rate (7)% 5 %
Mix 1 % 1 %
Segment Profit(2)
Amount $24 $22
Growth Rate 7 % (21)%
Mix 5 % 4 %
Segment Profit
Margin 8.76 % 7.62 %
Refer to definitions for an explanation of calculations.
(1) Total consolidated revenue for the three months ended September 30,
2008 is $24.3 billion, which included total segment revenue of $24.8
billion and Corporate revenue of $(0.5) billion. Total consolidated
revenue for the three months ended September 20, 2007 is $22.0
billion, which included total segment revenue of $22.4 billion and
Corporate revenue of $(0.4) billion. Corporate consisted primarily of
elimination of inter-segment revenue.
(2) Total consolidated operating earnings for the three months ended
September 30, 2008 is $426 million, which included total segment
profit of $483 million and Corporate loss of $(57) million. Total
consolidated operating earnings for the three months ended September
30, 2007 is $490 million, which included total segment profit of $514
million and Corporate loss of $(24) million. Corporate includes,
among other things, special items and impairments, (gain)/loss on sale
of assets and other, net.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
First Quarter
2009 2008
Receivable Days 21.5 22.2
Days Inventory on Hand 27 28
Debt to Total Capital 32 % 35 %
Net Debt to Capital 28 % 26 %
Return on Equity 12.7% 16.7%
Non-GAAP Return on Equity(1) 13.6% 17.5%
Return on Invested Capital(1) 6.03% 7.17%
Non-GAAP Return on Invested Capital(1) 6.40% 7.49%
Effective Tax Rate from Continuing Operations 31.4% 32.2%
Non-GAAP Effective Tax Rate from
Continuing Operations(1) 36.2% 32.2%
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations.
(1) See definitions for explanation of changes in method of calculating
these financial measures from prior quarters.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
(in millions, except per Common First Quarter
Share amounts) 2009 2008
Special Items
Restructuring charges $(49.7) $(14.8)
Acquisition integration charges (2.4) (5.4)
Litigation and other (0.3) (2.3)
Total special items (52.4) (22.5)
Tax benefit 17.1 7.7
Special items, net of tax $(35.3) $(14.8)
Decrease to diluted EPS from
continuing operations $(0.10) $(0.04)
Impairments, Gain/(Loss) on Sale of
Assets and Other, Net
Impairments, gain/(loss) on sale of
assets and other, net $(3.6) $0.2
Tax benefit / (expense) 20.9 (0.1)
Impairments, gain/(loss) on sale of
assets and other, net, net of tax $17.3 $0.1
Increase to diluted EPS from
continuing operations $0.05 $-
Weighted Average Number of Diluted
Shares Outstanding 361.1 370.2
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
First Quarter 2009
Impairments,
(Gain)/Loss
on Sale
of Assets
(in millions, except per Common Share Special and Other,
amounts) GAAP Items Net Non-GAAP
Operating Earnings
Amount $426 $52 $4 $482
Growth Rate (13)% (6)%
Provision for Income Taxes $114 $17 $21 $152
Earnings from Continuing Operations
Amount $250 $35 ($17) $268
Growth Rate (18)% (16)%
Diluted EPS from Continuing
Operations
Amount $0.69 $0.10 ($0.05) $0.74
Growth Rate (16)% (14)%
First Quarter 2008
Impairments,
(Gain)/Loss
on Sale
of Assets
Special and Other,
GAAP Items Net Non-GAAP
Operating Earnings
Amount $490 $23 - $512
Growth Rate 9 % 8 %
Provision for Income Taxes $144 $8 - $151
Earnings from Continuing Operations
Amount $303 $15 - $318
Growth Rate 4 % 3 %
Diluted EPS from Continuing
Operations
Amount $0.82 $0.04 - $0.86
Growth Rate 15 % 15 %
The sum of the components may not equal the total due to rounding
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
First Quarter
(in millions) 2009 2008
GAAP Return on Equity 12.7 % 16.7 %
Non-GAAP Return on Equity
Net earnings $249.1 $301.8
Special items, net of tax, in continuing
operations 35.3 14.8
Impairments, (gain)/loss on sale of assets and
other, net, net of tax, in continuing
operations (17.3) (0.1)
Adjusted net earnings $267.1 $316.5
Annualized $1,068.4 $1,266.0
Divided by average shareholders'
equity(1) $7,832.8 $7,222.6
Non-GAAP return on equity(2) 13.6 % 17.5 %
First Quarter
2009 2008
GAAP Return on Invested Capital(2) 6.03 % 7.17 %
Non-GAAP Return on Invested Capital
Net earnings $249.1 $301.8
Special items, net of tax, in continuing
operations 35.3 14.8
Impairments, (gain)/loss on sale of assets and
other, net, net of tax, in continuing
operations (17.3) (0.1)
Interest expense and other, net of tax 39.9 27.5
Adjusted net
earnings $307.0 $344.0
Annualized $1,228.0 $1,376.0
Divided by average total invested
capital(3) $19,177.2 $18,365.9
Non-GAAP return on invested capital(2) 6.40 % 7.49 %
(1) The average shareholders' equity shown above is calculated using the
average of the prior year's fourth quarter and the current quarter.
(2) See definitions for explanation of changes in method of calculating
these financial measures from prior quarters.
(3) Total invested capital is calculated as the sum of the current portion
of long-term obligations and other short-term borrowings, long-term
obligations, total shareholders' equity and unrecorded goodwill. The
average total invested capital is calculated using the average of
total invested capital at the end of the prior year's fourth quarter
and the current quarter. Unrecorded goodwill is $7.5 billion for all
periods presented.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
First Quarter
(in millions) 2009 2008
GAAP Effective Tax Rate from Continuing
Operations 31.4 % 32.2 %
Non-GAAP Effective Tax Rate from Continuing
Operations
Earnings before income taxes and
discontinued operations $363.9 $446.9
Special items 52.4 22.5
Impairments, (gain)/loss on sale of assets
and other, net 3.6 (0.2)
Adjusted earnings before income taxes and
discontinued operations $419.9 $469.2
Provision for income taxes $114.1 $143.7
Special items tax benefit 17.1 7.7
Impairments, (gain)/loss on sale of assets
and other, net, tax impact 20.9 (0.1)
Adjusted provision for income taxes $152.1 $151.3
Non-GAAP effective tax rate from continuing
operations(1) 36.2 % 32.2 %
First Quarter
2009 2008
Debt to Total Capital 32 % 35 %
Net Debt to Capital
Current portion of long-term obligations
and other short-term borrowings $166.5 $386.8
Long-term obligations, less current portion
and other short-term borrowings 3,597.0 3,347.5
Debt $3,763.5 $3,734.3
Cash and equivalents (672.2) (1,289.6)
Net debt $3,091.3 $2,444.7
Total shareholders' equity $7,918.1 $7,068.2
Capital $11,009.4 $9,512.9
Net debt to capital 28 % 26 %
Forward-Looking Non-GAAP Financial Measures
The Company presents non-GAAP earnings from continuing operations and
non-GAAP effective tax rate from continuing operations (and presentations
derived from these financial measures) on a forward-looking basis. The
most directly comparable forward-looking GAAP measures are earnings from
continuing operations and effective tax rate from continuing operations.
The Company is unable to provide a quantitative reconciliation of these
forward-looking non-GAAP measures to the most comparable forward-looking
GAAP measures because the Company cannot reliably forecast special items
and impairments, (gain)/loss on sale of assets and other, net, which are
difficult to predict and estimate and are primarily dependent on future
events. Please note that the unavailable reconciling items could
significantly impact the Company's future financial results.
(1) See definitions for explanation of changes in method of calculating
these financial measures from prior quarters.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
DEFINITIONS
GAAP
Debt: long-term obligations plus short-term borrowings
Debt to Total Capital: debt divided by (debt plus total shareholders'
equity)
Diluted EPS from Continuing Operations: earnings from continuing
operations divided by diluted weighted average shares outstanding
Effective Tax Rate from Continuing Operations: provision for income taxes
divided by earnings before income taxes and discontinued operations
Operating Cash Flow: net cash provided by / (used in) operating
activities from continuing operations
Segment Profit: segment revenue minus (segment cost of products sold and
segment selling, general and administrative expenses)
Segment Profit Margin: segment profit divided by segment revenue
Segment Profit Mix: segment profit divided by total segment profit for
all segments
Return on Equity: annualized net earnings divided by average
shareholders' equity
Return on Invested Capital: annualized net earnings plus interest expense
and other divided by (average total shareholders' equity plus debt plus
unrecorded goodwill)(1)
Revenue Mix: segment revenue divided by total segment revenue for all
segments
NON-GAAP
Net Debt to Capital: net debt divided by (net debt plus total
shareholders' equity)
Net Debt: debt minus (cash and equivalents and short-term investments
available for sale)
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from
continuing operations divided by diluted weighted average shares
outstanding
Non-GAAP Diluted EPS from Continuing Operations Growth Rate: (current
period non-GAAP diluted EPS from continuing operations minus prior period
non-GAAP diluted EPS from continuing operations) divided by prior period
non-GAAP diluted EPS from continuing operations
Non-GAAP Earnings from Continuing Operations: earnings from continuing
operations excluding special items and impairments, (gain)/loss on sale
of assets and other, net, both net of tax
Non-GAAP Earnings from Continuing Operations Growth Rate: (current period
non-GAAP earnings from continuing operations minus prior period non-GAAP
earnings from continuing operations) divided by prior period non-GAAP
earnings from continuing operations
Non-GAAP Effective Tax Rate from Continuing Operations: (provision for
income taxes adjusted for special items and impairments, (gain)/loss on
sale of assets and other, net) divided by (earnings before income taxes
and discontinued operations adjusted for special items and impairments,
(gain)/loss on sale of assets and other, net)(2)
Non-GAAP Operating Earnings: operating earnings excluding special items
and impairments, (gain)/loss on sale of assets and other, net
Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP
operating earnings minus prior period non-GAAP operating earnings)
divided by prior period non-GAAP operating earnings
Non-GAAP Return on Equity: (annualized current period net earnings
excluding special items and impairments, (gain)/loss on sale of assets
and other, net, both net of tax) divided by average shareholders'
equity(2)
Non-GAAP Return on Invested Capital: (annualized net earnings excluding
special items, impairments, (gain)/loss on sale of assets and other, net
and interest expense and other all net of tax) divided by (average total
shareholders' equity plus debt plus unrecorded goodwill)(2)
(1) During the first quarter of fiscal 2009, the Company began to exclude
interest expense from the calculation of GAAP return on invested
capital. Prior year results have been recast to reflect the new
calculation methodology.
(2) During the first quarter of fiscal 2009, the Company began to exclude
the impact of impairments, (gain)/loss on sale of assets and other,
net, net of tax from the calculation of non-GAAP effective tax rate
from continuing operations, non-GAAP return on equity and non-GAAP
return on invested capital consistent with the calculation of other
non-GAAP financial measures. Prior year results have been recast to
reflect the new calculation methodology.
